Introductory Accounting A Measurement Approach For Managers 1st Edition Daniel P. Tinkelman - Solutions

The purpose of this question is to let you see that different definitions of certain ratios exist in the world. Look up how ROA is defined by:A. Yahoo Finance (go to their website, pick a stock to look at, then look at key statistics. You should be able to find “Key Statistics Help”)B.
Define the terms “avoidability” and “divisibility.” Is there a relation between these two concepts?
Define the terms “homogeneity” and “interchangeability.” Are these related concepts?
Define the terms “variability” and “responsiveness.” Are these related terms?
The IMA uses the terms “fixed responsiveness” and “proportional responsiveness.”A. Define these terms.B. Give an example of inputs to a process that are likely to show fixed responsiveness.C. Give an example of inputs to a process that are likely to show proportional responsiveness.
What are “mixed costs”? Are they the same as “step costs”?Explain your answer.
Name and briefly describe some of the methods described in the chapter that companies use to understand the patterns of their costs.
Explain how the high–low method works.
In the cost-volume–profit model:a. What is meant by contribution margin per unit?b. What is meant by break-even point?c. What is the formula for the number of units to be produced at the break-even point?
What are some limitations to the usefulness of cost–volume–profit analysis? (This relates to the underlying assumptions of this method.)
What are sunk costs? Are they relevant to decisions about future actions? Why, or why not?
What costs are relevant to short-term decision-making?
Explain what is meant by:A. Outlay costs B. Opportunity costs C. Sunk costs D. Relevant costs.
The chapter discussed four measures used to evaluate proposed investments. Briefly describe how each one works:A. Payback period B. Accounting rate of return C. Internal rate of return D. Net present value
The chapter discussed four measures used to evaluate proposed investments. For each of the following, list one advantage and one disadvantage of the method:A. Payback period B. Accounting rate of return C. Internal rate of return D. Net present value
List and briefly explain three reasons that companies prepare budgets.
What is the difference between “imposed” budgets and“participative” budgets?
What is meant by a “flexible” budget? Why is it useful?
Explain what is meant by an incremental budget, and how it differs from a zero-based budget.
What is a standard cost? Why do companies use them?
What are the advantages of setting “tight” standards, rather than “achievable” standards? What are the disadvantages?
What is a key performance indicator? Does it have to be a financial measure? Explain.
Define the terms “usage” and “rate” variances. Give the formulas used to compute these variances for materials.
For each of the examples A–F, indicate which of the terms apply. (Some terms may apply more than once—others might not apply at all.) The terms are:Avoidability Traceability of costs Divisibility of costs Homogeneity Interchangeability Interdependency A. John Lee is trying to model the costs of
For each of the following examples, indicate which of these terms apply. (Some terms may apply more than once—others might not apply at all.) The terms are:Fixed responsiveness of input Proportional responsiveness of input Variable cost Fixed cost Step cost Mixed cost A for-profit school provides
Match the terms below to the IMA’s (2014) definitions:Avoidability Capacity Divisibility Homogeneity Interchangeability Responsiveness Traceability A. “A characteristic of an input that allows for the input (and its costs) to be eliminated as a result of a decision.”B. “A characteristic of
Assume that a dairy sells milk by the gallon. For each gallon of milk, it has the following costs:Within the relevant range of activity, it has other costs that are fixed at $2 million per month.A. Compute the total costs required for production of 500,000 gallons.B. Compute the total costs
You have been given the data on nine observations of volume and cost below. Using the high–low method:A. Identify the high and low observations B. Compute the difference in volume between the high and low observations C. Compute the difference in cost between the two observations D. Compute the
You have been given the data on nine observations of volume and cost below. The data is the same as that in the previous problem except for one observation.Using the high–low method:A. Identify the high and low observations B. Compute the difference in volume between the high and low observations
The data below, in millions of dollars, were taken from the 2013 Form 10-K of Zipcar. Zipcar is a very short-term car rental company, specializing in providing cars for periods that can be as short as an hour.A. Compute the change in 2013 in:a. Revenuesb. Operating expenses.B. Compute the ratio of
Use the data in application question A5, and:A. Draw a scatter plot, using Excel B. Does the pattern seem generally linear?C. Do any of the observations seem out of line, or unusual?D. Does the pattern seem to indicate any fixed costs, at a volume of zero?
use the data in application question A6, and A. Draw a scatter plot, using Excel.B. Does the pattern seem generally linear?C. Do any of the observations seem out of line, or unusual?D. Does the pattern seem to indicate any fixed costs, at a volume of zero?
Use a spreadsheet program, or special purpose statistical software, to do this problem. Use the data in application question A5, and:A. Compute the regression line that best fits the data B. What is the R2 statistic for your regression line? Is this indicative of a good fit to the data?C. The data
Use a spreadsheet program, or special purpose statistical software to do this problem. Use the data in application question A6, and:A. First, use only the first eight observations. Compute the regression line that best fits the data. What is your estimate of:a. Fixed costs?b. Variable costs?B. What
The Joffre Company has the following cost function for one of its products:Fixed costs = $500,000 Variable cost per unit = $36 Selling price per unit = $41 A. Compute the operating profit or loss at the following levels of output:a. 0 unitsb. 50,000 unitsc. 150,000 unitsd. 1,000,000 units.B.
Using data in the previous problem for the Joffre Company, use Excel or another spreadsheet program, graph for each 100,000 level of production from zero to 600,000 units:A. Total costs B. Operating profits or losses
The Kitchener Company has the following cost function for one of its products:Fixed costs = $2,700,000 Variable cost per unit = $91 Selling price per unit = $100 A. Compute the operating profit or loss at the following levels of output:a. 0 unitsb. 150,000 unitsc. 250,000 unitsd. 400,000 unitse.
Using data in the previous problem for the Kitchener Company, use Excel or another spreadsheet program to graph for each 100,000 level of production from zero to 500,000 units:A. Total costs B. Operating profits or losses
Assume that you are an analyst who is studying the Tirpitz Shipping Company. The company has a fleet of 40 large ships. Right now, about 40% of its operating costs are fixed costs related to depreciation and maintenance of the ships, and the other 60% vary with the amount of cargo it carries. It
The Ludendorf Company is an information company, which has begun operations this year. It has purchased the facilities it needs, and hired a great staff of people at fixed annual salaries. This year, it reported fixed costs of $100 million, sales of $30 million, and variable costs of $2 million.The
The Petain Company produces and sells 40,000 units each month. It has the capacity to produce 50,000 units. A large retailer has asked Petain if the company would make a special, one-time order of 14,000 units. If Petain accepts the order:There will be higher variable manufacturing costs It will
Assume that Jellico Inc. normally sells its products for $12 each. Assume that a customer asks for a special order of 10,000 units at a price of $70,000, or $7 per unit. Jellico has excess capacity.Given these facts:A. Find the cost per unit before accepting the special order, considering all
Assume that Haig Inc. normally sells its products for $23 each. A customer asks for a special order of 5,000 units at a price of $80,000, or $16 per unit. Haig has excess capacity to make 4,000 units, and this means that if it accepts this order, it will not be able to sell 1,000 units to regular
Samsonov Corp. is trying to decide whether to make packaging for its products itself, or whether to outsource the materials to the Moltke Corp. Its current cost to produce 250,000 packages is:Moltke Corporation offers to sell packages to Samsonov for $0.50 each.A. Based only on financial
The Foch Corp. has two product lines: Somme and Verdun. Data for these two product lines is shown below:A. Assuming that all of the fixed costs allocated to Verdun are avoidable if the product line is dropped, should Foch drop this line? Explain.B. If the fixed costs allocated to Verdun are not
Allenby Corp. has $10 million to invest.Listed below are the expected future cash inflows to be received for four alternative investments, in millions of dollars.A. Compare investments A and B.a. Compute the payback periods for Investments A and B.b. Which one would you pick, based only on payback
The Liman Corp. has a choice among the following investments. Each requires an initial outlay of $10 million.Figures are shown in millions of dollars.A. Compute the accounting rate of return for both projects.B. Using only the accounting rate of return, which project would you pick? Why? Year 1
Use the same data as question A23.A. Compute the net present value at an interest rate of 5% for the four alternative projects.B. Which one would you choose?C. Compute the net present value of the projects at an interest rate of 10%.D. Does your choice of which project is best change?
Use the same data as question A24.Compute the net present value of both projects at a discount rate of 8%, and decide which one you prefer.
The Pershing Company is considering an investment. The investment will cost $900,353. The projected net cash flows areThere will be no cash flows after Year 6.A. Compute the NPV of the project at a discount rate of 12%.B. Compute the IRR of the project.C. Assume the company has a “hurdle rate”
The Falkenhayn Company is considering an investment. The investment will cost $9,805. The projected net cash flows areThere will be no cash flows after Year 5.A. Compute the NPV of the project at a discount rate of 7%.B. Compute the IRR of the project.C. Assume the company has a “hurdle rate”
The Hindenberg Corp. is comparing the following two investment projects. Each requires an initial outlay of $8,000. The projected inflows are shown below.Inflows after Year 5 are zero.A. Compute the NPV of both projects at an interest rate of 9%.B. Which project would you prefer? Why? Year Project
The Fisher Corp. is comparing two investment projects. Information for the two projects is shown below. The company uses 8%as a discount rate.The initial outlays and estimated future cash inflows for the two projects are shown below.A. At an 8% discount rate, compute the NPV of the two projects.B.
Listed below are several terms related to budgeting.Top-down budgets Participatory budgets Incremental budgets Zero-based budgets Flexible budget Static budget For each of the situations below, identify which budgeting term is involved:A. In our company, we don’t trust the department managers to
(Budgeting—using Excel) The Ren Company had the following income statement for 2013:Using a spreadsheet, make a budgeted income statement for 2014 using the following assumptions:Sales increase by 6%.The uncollectible sales are 1.1% of sales.Cost of goods sold in 2013 contained $40,000 of fixed
Use the same spreadsheet you have just used to answer the previous problem. In this problem your boss asks you to change various assumptions, one at a time. In each case, your starting point is the spreadsheet you created for the previous problem. What will the budgeted net income for 2014 be if
The Brusilov Company makes chairs. The budget and actual results for the month are shown below:A. Compute the following sales variances:a. Total sales varianceb. Variance due to price changesc. Variance due to volume B. Compute the following materials variances:a. Total materials varianceb.
Use the facts for the Brusilov Company from the previous problem. Assume the company uses a flexible budget.A. Compute the flexible budget target for sales.B. Compute the sales variance from the flexible budget target (adjusted for the actual volume of sales).C. Compute the materials usage and
The Scheer Corporation produces ship models. The company uses a standard cost system and has set the following standards for materials and labor.During this period, Scheer produced 10,000 ship models. The actual wood purchased and used was 22,000 pieces, at $0.90 per piece. There were no starting
Use the same facts as the previous problem. For the Scheer Company:A. Compute the standard cost of labor that should be incurred to produce 10,000 ship models.B. Compute the actual total cost of direct labor.C. For direct labor, compute:a. Total labor varianceb. The labor quantity (efficiency)
The Conrad Company makes one product. The standard amount of material per unit is set at 2 kilograms, with a standard price per kilogram of €3. During the month, 6,000 units were produced. 11,800 kilograms of material were used, at an average cost per kilogram of €3.20.A. Compute the total
The French Corp. has budgeted fixed overhead costs for the year of $1,200,000. It budgeted that it would produce 200,000 units.A. What is the budgeted fixed cost per unit?B. Assume that it actually spends $1,200,000 on fixed costs, and produces 300,000 units because the sales force has found more
The French Company had budgeted to sell 2 million units at $6 each. Actual sales were 2.1 million units at $6.30 each. Compute:A. The total variance in sales.B. The part of the variance due to a difference in units sold.C. The part of the variance due to a difference in average selling price.
Accounting textbooks generally say that the decision to accept a special order should be based on the “relevant” or avoidable costs of filling the order, not the normally computed full costs of production. The full costs include some fixed costs per unit. Studies of managers typically show that
Theoretically, sunk costs should be irrelevant to short-term decision-making, since these are costs that do not vary between alternatives. However, some psychological studies show that people are very reluctant to give up on projects once costs have been incurred. Can you suggest reasons why
The discussion in this chapter on whether to discontinue a product has focused on the avoidable financial costs.Assume that a company located in a small city in Ohio is deciding whether to buy the major components of its product from a supplier in Asia, rather than making the parts in its own
Assume a company is trying to decide whether to manufacture products itself, or to outsource the production to foreign factories. Assume that, at anticipated levels of production, the cost of goods sold will be better by 2% of sales than if it makes the products itself. If it makes the products
The Hamilton Corp. uses a standard cost system, and computes variances using the methods described in this chapter. Consider what impact each of the following actions might have on the company’s labor and materials usage and rate variances, and on other company costs:A. The purchasing department
You are investigating variances at the Hamilton Corp.You note that there is a favorable labor usage variance, which is good, since there had been unfavorable variances for the last year. However, you also notice the number of defective products produced has gone up. Could there be a relation
Charities are often evaluated based on certain efficiency ratios. One ratio is the percentage of donated funds raised that is used for program expenses. Assume that a company is sponsoring a complicated, three-day charity walk to raise money for breast cancer. Each person who walks promises to
About how many public companies are there in the U.S.? Why do they prepare financial statements?
About how many businesses are there in the U.S., including nonpublic companies? Why would they prepare financial statements?
Explain how financial reports can:A. Provide new information B. Confirm prior information.
If you were looking at a company’s reported profits and revenues, what are some things you might compare the reported results to, in order to judge whether performance was good or bad?
If you were looking at a company’s ratios related to liquidity and solvency, what are some things you might compare the reported results to, in order to judge whether these measures were good or bad?
Explain what is meant by both vertical analysis and horizontal analysis.
What are some benefits of using ratios in financial analysis?
What is a limitation of using ratio analysis?
Do movements in stock prices of public companies seem most related to information in the balance sheet, the income statement, or the statement of cash flows?
Do movements in stock prices of public companies seem most related to persistent, recurring items in the income statement, or to onetime items?
What does the caption “cash and cash equivalents” mean in the Panera financial statements?
What is “goodwill” in the Panera financial statements?
In the Panera balance sheet, the equity section contains a caption for “common stock.” Many students incorrectly think this represents all the equity that relates to the common shareholders. Explain why they are wrong, and why this caption does not contain all of the equity attributable to
Explain how you can tell that Panera has a classified balance sheet.
Explain what is meant by:A. A common size balance sheet B. A common size income statement C. A percentage change income statement.
Explain what is meant by “basic” earnings per share.
List some of the types of things that you would expect to see on a statement of changes in equity.
What is meant by retained earnings? What might change its balance during the year?
What is meant by accumulated comprehensive income? What might change its balance during the year?
What is meant by additional paid-in capital?What might change its balance during the year?
When a company uses the indirect method of showing operating cash flows, it starts with net income, and then shows items that explain why net income is different from operating cash flows. In general, what are the three types of items listed in the chapter that explain the difference?
Explain the difference between return on assets (ROA)and return on common equity (ROCE).
Explain how “decomposing” ROCE into three ratios can provide an analyst with more insight into a company’s basic strategy.
Explain what is meant by:A. Leverage B. Operating leverage C. Financial leverage.
Explain what is meant by the terms “solvency” and“liquidity.”
How can a company stay in business if it has more liabilities than assets, and therefore has negative equity?
How can a company go bankrupt if its balance sheet shows more assets than liabilities?
Explain what is meant by each of the following:A. Current ratio B. Accounts receivable turnover C. Inventory turnover D. Days’ sales in receivables E. Interest coverage ratio
For public companies, what clues to management’s stewardship might you find in reports by auditors?
The chapter mentions some limitations of financial statements. Explain why each of the following statements is not correct:A. The market value of any company can be found by looking at its balance sheet. The total shareholders’ equity is the company’s market value.B. The first indication anyone

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Introductory Accounting A Measurement Approach For Managers 1st Edition Daniel P. Tinkelman - Solutions

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